Operation Management Assignment

THE

 ASSIGNMENT

 IS

 DUE

 ON

 THE

 November

 21

  BEFORE

 CLASS

  LATE

 SUBMISSION

 MAY

 NOT

 BE

 ACCEPTED

 OR

 SUBJECT

 TO

 PENALTIES

  Operations

 Management

 Fall

 2014

  Assignment

 3–

 Quality

 Management

  Note:

 It

 is

 encouraged

 to

 use

 Excel

 to

 do

 the

 calculations,

 however

 you

 have

 to

 state

 explicit

 your

  calculation

 steps

 and

 print

 out

 the

 result.

 Electronic

 copy

 is

 not

 accepted.

  1. A company currently using an inspection process in its material receiving department is trying to install an overall cost reduction program. One possible reduction is the elimination of the inspection position. This position tests material that has a defective content on the average of 0.05. By inspecting all items, the inspector is able to remove all defects. The inspector can inspect 60 units per hour. The hourly cost of this position is $10. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $25 each when they are detected in final product testing.

 (2

 x

 10

 points)

  a) What

 is

 the

 cost

 of

 inspecting

 each

 unit?

$0.1667 per unit. Inspection of 60 units cost $10 (since hourly wage of the inspector is $10 and he can inspect 60 units an hour), the cost of inspecting each unit must be $10/60, $0.1667. b) Does

 this

 position

 increase

 or

 decrease

 the

 overall

 cost

 of

 quality?

By comparing the price of inspecting and not inspecting (replacing), we can see that the inspection decreases the cost of quality, thus benefiting the company, by $1.0833 per unit. Replacing a defective unit costs the company $25 – and since 5% of the units are defective, the cost is average $1.25 per every unit....